The Government has bought forward some of the provisions of the new Credit Contracts Legislation Amendment Act (CCLAA), from 1 June to 1 May 2020. The Government states the economic disruption caused by COVID-19 has led to significant financial uncertainty for many consumers, many of whom will face uncertain job prospects in the coming months.
To better protect consumers who do take out new loans under high-cost credit contracts during this time, the Government has decided to bring forward the commencement date of some protections relating to high-cost loans.
The measures that will come in early are:
- the cost of credit cap, so that people will never have to pay back more than 100 per cent of the loan principal (section 45E)
- banning compound interest on high-cost loans (section 45I) and
- limiting default fees to $30 (section 45J)
The provisions that will now be coming into force on 1 May will be supported by sections 34(1), 37, 40(1) which provide new Commerce Commission powers relating to compliance orders and corrective advertising, and regulation 6A which defines how the weighted annual interest of a consumer credit contract is to be calculated. Please note that the commencement date of the other provisions relating to high cost lending will still commence on 1 June as previously planned.
- the 0.8% per day interest rate cap (section 45H) and
- regulation of mobile traders (section 16A)
In response to these changes, we have released a new version of finPOWER Connect, Version 3.3.0, which has functionality to assist you in complying with the High Cost Loan legislation. We have also released a guide which can be downloaded here.
Since this is a major new version and High-Cost Loans is an important new function, we suggest you enlist the assistance of your local Intersoft Reseller to help you upgrade.